GLOBAL equities had an outstanding year in 2019, returning 27.4%, the best in a decade.

Fearing a year ago that the current market expansion, now the longest in living memory, might be coming to an end, investors were quick to jump on the promise offered by a policy volte-face performed by central banks. Monetary normalisation flipped into a fresh easing cycle ending suggestions that cash was, once again, worth owning. Cash was trashed, equities rose steadily throughout the year, punctuated only by brief episodes of knee-trembling associated with the US/China trade dispute.

Central banks were correct to change their minds. Trump’s trade tariffs increasingly lent against the business cycle as companies, unable to predict what Trump might do next, reined in their investment plans. Across the globe, manufacturing companies suffered badly – particularly in Germany.

Looking into 2020, equity investors will want to see business leaders react to the easier financial conditions central banks have created and the ‘Phase One’ trade truce reached last month by getting their cheque books out. The fourth quarter of 2019 brought solid gains for equity markets (+7.7%, local currency) and so the sooner activity data starts to improve the better.

Nowhere is this more important than the UK. Our economy has laboured long under the burden of policy and Brexit uncertainty and it is to be hoped that an end to the Brexit impasse will unlock considerable pent-up economic and investor demand. Boosted by these prospects, Sterling rose nearly 5% in the fourth quarter.

Further encouragement for the UK comes from the newfound political stability. With the Labour Party insisting their comprehensive election defeat was down to messaging rather than the message itself – the British don’t do revolutions (economic or otherwise) - Boris Johnson looks well set for a full five-year term with free rein to deliver the policies needed to secure his new ‘terriTories’.

Chancellor Sajid Javid’s Budget Statement due in March should see the Government set out its stall. If Johnson uses the next reshuffle to ‘let go’ of the ideologues within his Cabinet then that would be doubly positive.

There is a general sense that UK assets have lagged world markets since the EU referendum in 2016. While true, this statement is more about the US than everywhere else; ignoring the all-conquering US equity market and from end May 2016, UK equities have matched World equities (ex the US) where the US has outperformed by 15%.

More encouraging is that price earnings ratios based on projected profits suggest that the UK market has cheapened by 14% since the referendum while ratings across all the major regions are around 5% richer. Given the appropriate conditions, a valuation-led upswing is certainly possible as international buyers come shopping.

Looking beyond these shores, the global economy is predicted to ‘enjoy’ modest growth, this year and next. While forecasters suggest that a recession looks unlikely, equally elusive will be a return to the trend growth rates of yesteryear. While the era of austerity may be coming to an end, it won’t feel like it for many.

In a recent speech Mark Carney, the outgoing Bank of England Governor, suggested that winter is coming as deep structural changes in economies sustain disinflationary pressures when central bankers’ scope to respond is already limited. He went on to echo comments from Larry Summers, once of the US Treasury and economic adviser to Obama, warning that we are just one US recession away from entering a global liquidity trap (in which raising policy interest rates will be impossible) – Europe and Japan are apparently already so snared.

While such a prognosis will ensure that macro-economic policies remain supportive (of final demand and investment markets), fears will build that the next downshift will not be as easily escaped as that of late 2018. The time has come for governments to shoulder more of the burden of promoting economic growth and Javid can lead the way. Markets will cheer provided that the increase in public debt is used responsibly.

Stephen Jones is chief investment officer of Kames Capital